Senior officials of the Prison Service and the Youth Justice Board have warned that the number of young people being held in custody in England and Wales has reached a crisis level and that the system is in danger of a "meltdown".

Figures released today by the Youth Justice Board reveal that 3,350 youngsters are currently being held and that immediate action was needed before the handful of beds now available were filled.

Dozens of children and youths from London are being held in South Yorkshire and the Scottish borders because of the shortage of beds, contravening rules that young offenders should not be held more than 50 miles from home.

Professor Rod Morgan, chairman of the Youth Justice Board, said: "The youth justice system has just a handful of bed spaces left. We can’t simply put up a sign saying ’No Vacancies’.

"Action is urgently needed to stop custody for young people going into meltdown."

Speaking on the Today programme he said that more children were being locked up despite a decline in the number of young people committing crimes.

He said: "I have never met a sentencer who doesn’t feel that locking up a child and a young person in custody should be an absolute last resort. But the last resort today is substantially lower than it was 10 to 15 years ago.

"We are locking up twice as many kids today as 10 to 15 years ago, and yet volume crime and the responsibility of young people for volume crime has fallen by more than 40%.

"Locking up more young children is not the way for us to sleep more safely in our beds.

"The prognosis if we lock up children and young people - and I hope we can make a distinction between the way we treat children and the way we treat adults - is actually a counsel of despair."

Martin Narey, chief executive of the children’s charity Barnardo’s and a former director general of the Prison Service, said that the increased use of Anti-Social Behaviour Orders to deal with persistent offenders has led to more children being locked up for activities that would not previously have been punished by custody.

He told the Today programme that the number of children and youths in custody for burglary and car crime has fallen since the mid-90s.

Mr Narey said: "Custody is sometimes necessary for children, and in large numbers, but not in the numbers we are locking up at the moment. When you overwhelm custody, as we are doing at the moment, it can’t possibly work.

"Custody in the right circumstances can still be a constructive experience - it can take the chaos out of a child’s life, give them education and get them off drugs. But in the sort of numbers which the Youth Justice Board is having to lock up at the moment, it is almost always a destructive experience."

Anne Owers, Chief Inspector of Prisons, said: "Every time I go into a custodial establishment, I see staff achieving amazing things in difficult circumstances with highly troubled young people.

"But I fear the system is approaching breaking point. And I am particularly concerned about the number of young people with mental illness who end up in our prisons because of the lack of adequate provision outside."

A spokeswoman for the Youth Justice Board said that increasing numbers of young offenders were being forced to share cells and many from London were being transported around the country because there were no beds available near their homes.

The Home Office said that of the 190,000 young people dealt with by police every year, just 4% resulted in a custodial sentence.

A Home Office spokeswoman said: "Public protection is our priority and we support tough sentences for those judged to be a danger to the public. Flexible community orders are a flexible alternative to prison for lower level offenders. Custody for under-18s is a last resort.

"The Youth Justice Board has helped drive up standards for youths in custody, including minimum periods out of their cell and placing far stronger emphasis on education and training."

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